Just when we thought the spread of the coronavirus was waning, news of a spike in cases from China led stocks lower on Thursday.
However, the pullback in the major indices was rather modest, leaving stocks still solidly higher for the week heading into Friday.
The Dow finished lower by 0.43% (or about 128 points) to 29,423.31. The index jumped nearly 1% on Wednesday to reach a new high.
The S&P was off 0.16% to 3373.94 and the NASDAQ slipped 0.14% (or 14 points) to 9711.97. Both of these indices reached intraday highs as they recovered from the morning selloff and momentarily turned positive.
Those losses aren’t that bad when you consider that China confirmed more than 15,000 new cases of the coronavirus and over 250 additional deaths.
However, it’s extremely important to note that the spike was mainly due to the method that China is now using to tabulate cases, and NOT an overnight explosion of new infections.
Nevertheless, yesterday we were hearing that the situation was improving and today we’re hearing that might not be the case. It’s a perfect example of the uncertainty in the air right now that the market really hates.
That doesn’t mean stocks are panicking, though. Quite the opposite! Stocks had a decent selloff in the morning, but fought back to close with slight losses.
And now the NASDAQ heads into Friday’s session with a gain of 2% for the week, while the S&P and Dow are up 1.4% and 1.1%, respectively. These indices are also a stone’s throw away from regaining new highs.
The big roadblock, though, is the Friday selloffs that we’ve seen in four of the past five weeks. Investors have been taking money off the table heading into the weekend during this coronavirus, and today’s news shows why. No one knows what’s going to happen from one minute to the next.
Today's Portfolio Highlights:
ETF Investor: Today’s coronavirus-induced selloff provided Neena with a great opportunity to add an “ultra-cheap” fund that invests in the hottest sector of the market. The Vanguard Mega Cap Growth ETF (MGK) gives the portfolio exposure to names like Microsoft, Apple, Alphabet, Amazon and Facebook. In other words, it focuses on the big tech stocks that are powering this current rally and generating huge amounts of cash. MGK charges just 7 basis points and has almost $6 billion in assets. The editor also sold JPMorgan Ultra-Short Income ETF (JPST) for a slight gain. Read the complete commentary for a lot more on today’s moves.
Insider Trader: After a drought of activity due to “quiet” insiders, this portfolio has sprung into action for a second straight session. On Thursday, Tracey cashed in some big profits by selling half of Enphase (ENPH) and half of Eli Lilly (LLY) for gains of 114.5% and 26.1%, respectively. The former company reports next week, while the latter has displayed some weakness of late. ENPH has been “spectacular” since being added in late November, and LLY is the portfolio’s oldest position with inception in late October.
The new buy is WisdomTree (WETF), which operates an investment firm that’s well-known for its ETF portfolio. Shares plunged over the past year, but have bounced back recently after a solid quarterly performance. The insiders obviously thought the selling was overdone, because Tracey noticed that four of them bought shares of their own company just a few days after the report. In other words, it was a “cluster” buy. And now the editor is following suit by adding this Zacks Rank #2 (Buy) on Thursday with a 10% allocation, though warns that it will be volatile. Read the full write-up for more.
Home Run Investor: After selling (CCRN) today and two others yesterday, Brian plans to fill a couple of those open spots before the week is out. On Thursday, he added Hostess Brands (TWNK). You know what this company does. They make Twinkies, as well as Ho Hos, Ding Dongs, Cupcakes and a number of other sweet goods. This Zacks Rank #1 (Strong Buy) has beaten the Zacks Consensus Estimate in three of the last four quarters with no misses. The editor also likes its valuation, and believes that the rising operating margins will keep earnings estimates moving higher. Read the full write-up for more and get ready for another buy tomorrow.
Surprise Trader: The portfolio swapped restaurant chains on Thursday. Dave sold the underperforming Denny’s (DENN) and replaced it with a 12.5% allocation in Bloomin’ Brands (BLMN). The new buy’s brands include Outback Steakhouse as well as Carrabba’s, Bonefish, Fleming’s and Roy’s. BLMN has a positive Earnings ESP of 2.86% for the quarter coming before the bell on Tuesday, February 18. Analysts are looking for 35 cents EPS on revenues of $1.03 billion, which would represent year-over-year earnings growth of 16.67%. Read the full write-up for more on today’s moves.
Technology Innovators: The portfolio added Slack Technologies (WORK) on Thursday, which operates a business technology software platform. The company has released double-digit earnings surprises in its last two quarters. Brian especially liked to see the 14-cent loss in the second quarter narrow to a loss of 2 cents in the third. He wouldn’t be surprised if this stock reached profitability when it reports again next month. Earnings estimates have been heading higher as well, which underscores its status as a Zacks Rank #2 (Buy). Learn a lot more about this new addition in the full write-up.
Value Investor: This portfolio had lots of action on Thursday with three sells and two buys. Let’s take the sells first. In such a strong market, Tracey doesn’t think a defensive name like Aflac (AFL) in necessary, so she sold the name and banked 27%. Meanwhile, M/I Homes (MHO) and Manitowoc (MTW) have both slipped to Zacks Rank #5s (Strong Sells), leading the editor to sell these names for a nice gain of 22.7% and a very slight loss, respectively.
The new buys were homebuilder KB Home (KBH) and social media company Pinterest (PINS), which are both Zacks Rank #2s (Buys). Shares of KBH have soared 73% over the past year with the housing sector expected to be hot in the spring period due to low mortgage rates. It’s a “classic” value stock. PINS reported an “impressive” fourth quarter performance as it continues to develop into an “amazing” shopping platform. It’s value story isn’t as classic as KBH, but Tracey is playing the long game with this one and willing to be patient as it continues to grow. Learn a lot more about today’s moves in the full write-up.
Stocks Under $10: The portfolio filled one of its open spots on Thursday with a stock that’s fit for Valentine’s Day. Spark Networks (LOV) owns several online dating apps, including Zoosk, SilverSingles, EliteSingles, Jdate, Christian Mingle, eDarling, JSwipe, AdventistSingles, LDSSingles, and Attractive World. This Zacks Rank #2 (Buy) is an ADR so it doesn’t report on a timely schedule like most companies. But what really caught Brian’s attention is that the Zacks Consensus Estimate for 2020 is 74 cents, which would mark a huge swing into profitability from the 2019 number of a 32-cent loss. Read the full write-up for more on this new addition.
Have a Good Evening,
Jim Giaquinto
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